PWYP CanadaPWYP Canada
Claire WoodsideClaire Woodside
PWYP Canada ConsultantPWYP Canada Consultant
[email protected]@gmail.com
Lifting the VeilLifting the Veil
Exploring the Transparency Exploring the Transparency of Canadian Extractive of Canadian Extractive
CompaniesCompanies
MotivationMotivation
• Establish a working agenda for PWYP Establish a working agenda for PWYP CanadaCanada
• Improve general understanding of Improve general understanding of transparency in Canadatransparency in Canada
• Help groups, such as PWYP Canada, Help groups, such as PWYP Canada, to utilize publicly available to utilize publicly available information to hold companies information to hold companies accountable for their actions and accountable for their actions and decisions. decisions.
Research QuestionResearch Question
• What regulations/laws govern disclosure in the extractive industries in Canada?
AimAimMap the regulations/laws Map the regulations/laws
governing disclosure of governing disclosure of information amongst Canadian information amongst Canadian
extractive companies extractive companies • Reserve, Pricing and Cost DataReserve, Pricing and Cost Data• Payments to host governments Payments to host governments • Contracts/Leasing/Rights Contracts/Leasing/Rights (not discussed in this (not discussed in this
presentation)presentation)
• ESG FactorsESG Factors
LimitationsLimitations
• Focuses solely on public companiesFocuses solely on public companies• Looks at disclosure guidelines and Looks at disclosure guidelines and
not industry practicesnot industry practices• Focus solely on CanadaFocus solely on Canada
FindingsFindings
Level of DisclosureOil & Gas Mining
Resource, Reserve,Pricing, Cost,Production Data
Very high VeryHigh
Payments to HostGovernments
Medium High
Environmental andSocial Data
Low Medium
ConclusionsConclusions
1.1. Canada has relatively strong disclosure Canada has relatively strong disclosure regulations, therefore, Canadian companies regulations, therefore, Canadian companies should be quite transparent.should be quite transparent.
2.2. Despite strong regulations, actions can be Despite strong regulations, actions can be taken to improve Canada’s disclosure regimetaken to improve Canada’s disclosure regime
• Weaknesses:Weaknesses:• based on the concept of materialitybased on the concept of materiality• variation between sectors variation between sectors • Disclosure aimed at shareholders and not stakeholders Disclosure aimed at shareholders and not stakeholders
3.3. Publicly available information is underused Publicly available information is underused by NGOs and other stakeholdersby NGOs and other stakeholders
Implications for PWYP Implications for PWYP CanadaCanada
1. Increase PWYP Canada’s engagement with the 1. Increase PWYP Canada’s engagement with the TSX, the provincial stock exchanges, and TSX, the provincial stock exchanges, and Canadian accounting organizations. Canadian accounting organizations.
2. Support domestic and global initiatives which 2. Support domestic and global initiatives which would improve the clarity of Canadian would improve the clarity of Canadian reporting and which would increase the level of reporting and which would increase the level of disclosure in Canadadisclosure in Canada
3. Play a role in helping to disseminate information 3. Play a role in helping to disseminate information disclosed by companies and made publicly disclosed by companies and made publicly available through SEDARavailable through SEDAR
4. Address gaps in the legislation and advocate for 4. Address gaps in the legislation and advocate for mandatory and not ‘material’ disclosuremandatory and not ‘material’ disclosure
Future ResearchFuture Research
• Research transparency in practice in Research transparency in practice in the Canadian context. the Canadian context. – Compare what companies are required to Compare what companies are required to
disclose with what they actually disclose.disclose with what they actually disclose.
• Compare disclosure regulations in Compare disclosure regulations in different countries.different countries.
• Conduct similar research in other Conduct similar research in other countries with influential stock countries with influential stock exchangesexchanges
What is available and What is available and where to find it?where to find it?
Country-by-Country Country-by-Country DisclosureDisclosure
• Generally, information is disclosed on a Generally, information is disclosed on a country-by-country or mine-by-mine basiscountry-by-country or mine-by-mine basis
• Oil and gas companies can receive an Oil and gas companies can receive an exemption to disclose by ‘foreign exemption to disclose by ‘foreign geographic area’ for operations outside of geographic area’ for operations outside of North America (rarely used).North America (rarely used).
• Companies listed on two stock exchanges Companies listed on two stock exchanges can apply for an exemption to file in can apply for an exemption to file in accordance with another exchanges accordance with another exchanges regulations (this can affect country-by-regulations (this can affect country-by-country based disclosure)country based disclosure)
MaterialityMateriality
• Only information considered Only information considered materialmaterial is is disclosed. disclosed. – A A Material Material fact or changefact or change consists on consists on
something that has or could be expected to something that has or could be expected to affect the share priceaffect the share price
• Materiality is a subjective concept, that is Materiality is a subjective concept, that is interpreted by companiesinterpreted by companies– Professional advice and guidance is relied upon Professional advice and guidance is relied upon
to determine what is materialto determine what is material
• Smaller companies must disclose more than Smaller companies must disclose more than larger companieslarger companies
Reserve DataReserve Data
• Regulations NI 51-101, 43-101, 51-102.Regulations NI 51-101, 43-101, 51-102.• Documents to look for Annual Reports, Documents to look for Annual Reports,
Annual Information Forms, Technical Annual Information Forms, Technical ReportsReports
• There is a high level of disclosure of There is a high level of disclosure of pricing, production, and cost data.pricing, production, and cost data.
• Importance:Importance:– Provides information about future revenue Provides information about future revenue
flows of a particular projectflows of a particular project– Provides information about how long an Provides information about how long an
extractive project might lastextractive project might last
Reserve Data Cont’dReserve Data Cont’d
• When production and pricing data When production and pricing data alongside average costs are examined a alongside average costs are examined a rough estimate of the revenues of a rough estimate of the revenues of a project can be generatedproject can be generated
Production X Price - Costs = rough Production X Price - Costs = rough estimate of revenues from a particular estimate of revenues from a particular periodperiod
Example: Banro Corp. Example: Banro Corp. DRC, DRC, Twangiza Property Twangiza Property
(Information taken from the 2009 Feasibility (Information taken from the 2009 Feasibility Study/Technical Report available at www.sedar.com)Study/Technical Report available at www.sedar.com)
• Total Proven and Probable Reserves - 4.54 Total Proven and Probable Reserves - 4.54 million ounces of gold. million ounces of gold.
• Capital costs - US$377.43million. Capital costs - US$377.43million. – Average annual production of 312,979 ounces of gold Average annual production of 312,979 ounces of gold
over the first three years of the project at average over the first three years of the project at average operating cash costs of US$261 per ounce. operating cash costs of US$261 per ounce.
– Gold price of US 850.00/ounceGold price of US 850.00/ounce– Price of gold/ounce - Operating costs/per ounce X Price of gold/ounce - Operating costs/per ounce X
Production = revenues (after costs)Production = revenues (after costs)– 850 - 261 X 312, 979 = 184,344,631 850 - 261 X 312, 979 = 184,344,631 – Life of the mine 20.86 years.Life of the mine 20.86 years.
Payments to Host Payments to Host GovernmentsGovernments
• Regulations NI 43-101, NI 51-101, NI 51-102Regulations NI 43-101, NI 51-101, NI 51-102• Look for Annual Reports, Annual Information Look for Annual Reports, Annual Information
Forms, Material Change Reports, Technical Forms, Material Change Reports, Technical Reports, and MD & A reports.Reports, and MD & A reports.
• Significant information is available concerning Significant information is available concerning royalties and tax payments made by extractive royalties and tax payments made by extractive sector companies to host governments. sector companies to host governments.
• Companies with mineral properties are Companies with mineral properties are required to provide more detailed information required to provide more detailed information concerning royalties, taxes, and any other concerning royalties, taxes, and any other government levies applicable to a project, than government levies applicable to a project, than is required of oil and gas companies.is required of oil and gas companies.
PaymentsPayments
When royalties paid per quarter/per barrel/per day When royalties paid per quarter/per barrel/per day are disclosed alongside average daily production are disclosed alongside average daily production rates (different in each quarter) the amount of rates (different in each quarter) the amount of royalties paid by a company to a host country can royalties paid by a company to a host country can be approximated.be approximated.
Canadian Natural Resource LimitedCanadian Natural Resource Limited in the Ivory in the Ivory Coast Coast
Average daily production: 28.5Average daily production: 28.5
Royalties per barrel/per day in that quarter: $3.70Royalties per barrel/per day in that quarter: $3.70
Number of days in a quarter: 91Number of days in a quarter: 91
Royalties Paid to the Ivory Coast: 9 617 040Royalties Paid to the Ivory Coast: 9 617 040• First quarter 2008First quarter 2008
Example: Banro Corp.Example: Banro Corp.
• The Twangiza Property is not subject to any The Twangiza Property is not subject to any royalties, back-in rights, payments or other royalties, back-in rights, payments or other agreements or encumbrances.agreements or encumbrances.
• 10 year tax free holiday, after 10 years taxes of 30%10 year tax free holiday, after 10 years taxes of 30%• 5% administrative tax on the importation of 5% administrative tax on the importation of
machinery and consumablesmachinery and consumables– Est. 4 million over project life spanEst. 4 million over project life span
• In the 11th year Banro estimates that they will pay In the 11th year Banro estimates that they will pay 13 694 000 in tax. This will steadily decline over the 13 694 000 in tax. This will steadily decline over the next 10 years reaching just over 10 million in the next 10 years reaching just over 10 million in the 20th year of the mine.20th year of the mine.
Banro cont’dBanro cont’d• Employment - estimate a need for Employment - estimate a need for
200 local, expatriate and senior level 200 local, expatriate and senior level staffstaff– Local labour costs of 822, 464/annumLocal labour costs of 822, 464/annum– Expat costs of over 1 million for the first Expat costs of over 1 million for the first
four years and 411,000/annum for the four years and 411,000/annum for the next five yearsnext five years
Social and Environmental Social and Environmental FactorsFactors
• Regulations NI 51-101, NI 43-101, NI 51-Regulations NI 51-101, NI 43-101, NI 51-102, TSX Policy on Timely Disclosure. 102, TSX Policy on Timely Disclosure.
• Information that might be availableInformation that might be available– Risks and uncertainties believed to be materialRisks and uncertainties believed to be material
• Including political and social risksIncluding political and social risks
– Environmental and political issues that can Environmental and political issues that can affect property developmentaffect property development
– Social and environmental issues policies Social and environmental issues policies fundamental to a companies operationsfundamental to a companies operations• Ex. Human rights policiesEx. Human rights policies
– Environmental dataEnvironmental data• Waste disposal, liabilitiesWaste disposal, liabilities
Social and Social and Environmental Factors Environmental Factors
Cont’dCont’d• Mining companies are required to Mining companies are required to
disclosure far more social and disclosure far more social and environmental information than oil and environmental information than oil and gas companies.gas companies.
• Mining companies can rely upon external Mining companies can rely upon external experts with knowledge specific to social, experts with knowledge specific to social, political and environmental issues,political and environmental issues,
• Must include a discussion of the political, Must include a discussion of the political, legal, and environmental issues that can legal, and environmental issues that can effect resource estimates.effect resource estimates.
Banro - Social and Banro - Social and Environmental PoliciesEnvironmental Policies
• 6,000 per annum for Community relations6,000 per annum for Community relations• 20,000 per annum for years 1 to 4 for 20,000 per annum for years 1 to 4 for
training, 13, 700 for years 5 and uptraining, 13, 700 for years 5 and up• 5,500 per annum per month for 5,500 per annum per month for
environmental monitoring, nursery upkeepenvironmental monitoring, nursery upkeep• Environmental assessment - aim to follow Environmental assessment - aim to follow
Equator principles standardsEquator principles standards• Banro commits to hold public disclosure Banro commits to hold public disclosure
meetings to discuss the draft of the meetings to discuss the draft of the environmental and social impact environmental and social impact assessment before it is released. assessment before it is released.
Banro Cont’dBanro Cont’d
• Anticipates social conflict over resettlement. Anticipates social conflict over resettlement. – Cost of the resettlement actions plan is estimated to Cost of the resettlement actions plan is estimated to
be 13.2 million. be 13.2 million. – $20/ fruit tree$20/ fruit tree– 3.5 million for replacement of primary and secondary 3.5 million for replacement of primary and secondary
housinghousing
• Anticipates political conflict between regional Anticipates political conflict between regional and local governments. Local governments are and local governments. Local governments are involved with artisinal mining, which will be involved with artisinal mining, which will be displaced by this large scale minedisplaced by this large scale mine
Banro: Potential Social Banro: Potential Social and Environmental and Environmental
ImpactsImpacts– Deterioration in surface water quality Deterioration in surface water quality – Reduction in stream flow Reduction in stream flow – Disturbance of aquatic fauna, terrestrial fauna and Disturbance of aquatic fauna, terrestrial fauna and
flora,and soil and geology flora,and soil and geology – Depression of groundwater table due to dewatering Depression of groundwater table due to dewatering
activities activities – Employment creation (positive impact) Employment creation (positive impact) – Possible reduction in river blindness (positive impact)Possible reduction in river blindness (positive impact)– Displacement of social infrastructure and local Displacement of social infrastructure and local
livelihoods livelihoods – Deterioration in community water supply.Deterioration in community water supply.
Thank YouThank You
ResourcesResources
• www.sedar.comwww.sedar.com– Choose a languageChoose a language– Decide whether to search the database or Decide whether to search the database or
look for a particular company’s profilelook for a particular company’s profile– Look for the document that interests youLook for the document that interests you
• Company websites often have links. Company websites often have links. Look in the investor section for a link Look in the investor section for a link entitled “regulatory filings” or “sedar entitled “regulatory filings” or “sedar filing’ or “stock exchange filing”filing’ or “stock exchange filing”
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